Save Article

Motown's Pension Showdown

If benefits can't be cut, bankruptcy will become a new political default.

Aug. 5, 2013 7:20 p.m. ET

Detroit's unions have found an unlikely ally in Michigan's Republican Attorney General Bill Schuette, who has taken up their argument that the state constitution precludes federal bankruptcy court from reducing pension benefits. If this view holds, unions and politicians in financially strapped cities will be able to use Chapter 9 as a new political default to shed their bond debts. Look out below.

The Detroit case is likely to set precedents because it's the first large city that has tried to force haircuts on pensioners...